us internal revenue service: irb05-43
TRANSCRIPT
-
8/14/2019 US Internal Revenue Service: irb05-43
1/88
Bulletin No. 2005-4October 24, 200
HIGHLIGHTS
OF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered. They may not berelied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 200567, page 771.Low-income housing credit; satisfactory bond; bondfactor amounts for the period January through De-cember 2005. This ruling provides the monthly bond factoramounts to be used by taxpayers who dispose of qualified
low-income buildings or interests therein during the periodJanuary through December 2005.
T.D. 9226, page 772.Final regulations under section 864 of the Code relate to theapplication of the asset-use test to stock held by foreign in-surance companies. The regulations provide that income fromstock may, in some circumstances, be effectively connectedincome.
REG15808004, page 786.Proposed regulations under new section 409A of the Code,added as part of the American Jobs Creation Act of 2004, pro-vide certain rules relating to nonqualified deferred compensa-tion plans, which generally are effective as of January 1, 2005.These regulations provide general guidance with respect towhat arrangements are covered by section 409A, and the re-quirements that must be met under section 409A with respectto initial deferral elections, subsequent deferral elections andpayments. A public hearing is scheduled for January 25, 2006.
ADMINISTRATIVE
REG15008802, page 774.Proposed regulations under section 6320 of the Code relateto a taxpayers right to a hearing after the filing of a notice offederal tax lien (NFTL). The regulations make certain clarifyingchanges in the way collection due process hearings are con-
ducted and specify the period during which a taxpayer may quest an equivalent hearing. The regulations affect taxpayeagainst whose property or rights to property the Service filan NFTL. A public hearing is scheduled for January 19, 200
REG15009102, page 780.Proposed regulations under section 6330 of the Code relate
a taxpayers right to a hearing before or after levy. The regutions make certain clarifying changes in the way collection dprocess hearings are conducted and specify the period ding which a taxpayer may request an equivalent hearing. Tregulations affect taxpayers against whose property or righto property the Service proposes to levy. A public hearingscheduled for January 19, 2006.
Announcements of Disbarments and Suspensions begin on page 846.
Finding Lists begin on page ii.
-
8/14/2019 US Internal Revenue Service: irb05-43
2/88
The IRS Mission
Provide Americas taxpayers top quality service by helpingthem understand and meet their tax responsibilities and by
applying the tax law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument ofthe Commissioner of Internal Revenue for announcing officialrulings and procedures of the Internal Revenue Service and forpublishing Treasury Decisions, Executive Orders, Tax Conven-tions, legislation, court decisions, and other items of generalinterest. It is published weekly and may be obtained from theSuperintendent of Documents on a subscription basis. Bulletincontents are compiled semiannually into Cumulative Bulletins,which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application ofthe tax laws, including all rulings that supersede, revoke, mod-ify, or amend any of those previously published in the Bulletin.All published rulings apply retroactively unless otherwise indi-cated. Procedures relating solely to matters of internal man-agement are not published; however, statements of internalpractices and procedures that affect the rights and duties oftaxpayers are published.
Revenue rulings represent the conclusions of the Service on theapplication of the law to the pivotal facts stated in the revenueruling. In those based on positions taken in rulings to taxpayersor technical advice to Service field offices, identifying detailsand information of a confidential nature are deleted to preventunwarranted invasions of privacy and to comply with statutoryrequirements.
Rulings and procedures reported in the Bulletin do not have theforce and effect of Treasury Department Regulations, but theymay be used as precedents. Unpublished rulings will not berelied on, used, or cited as precedents by Service personnel inthe disposition of other cases. In applying published rulings andprocedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,and Service personnel and others concerned are cautionedagainst reaching the same conclusions in other cases unlessthe facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.1986 Code.This part includes rulings and decisions based on provisions ofthe Internal Revenue Code of 1986.
Part II.Treaties and Tax Legislation.This part is divided into two subparts as follows: Subpart A,Tax Conventions and Other Related Items, and Subpart B, Leg-islation and Related Committee Reports.
Part III.Administrative, Procedural, and Miscellaneous.To the extent practicable, pertinent cross references to thesesubjects are contained in the other Parts and Subparts. Alsoincluded in this part are Bank Secrecy Act Administrative Rul-ings. Bank Secrecy Act Administrative Rulings are issued bythe Department of the Treasurys Office of the Assistant Sec-
retary (Enforcement).
Part IV.Items of General Interest.This part includes notices of proposed rulemakings, disbar-ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative indexfor the matters published during the preceding months. Thesemonthly indexes are cumulated on a semiannual basis, and arepublished in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.
October 24, 2005 200543 I.R.B.
-
8/14/2019 US Internal Revenue Service: irb05-43
3/88
Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986Section 42.Low-IncomeHousing Credit
Low-income housing credit; satisfac-
tory bond; bond factor amounts for
the period January through December2005. This ruling provides the monthly
bond factor amounts to be used by taxpay-
ers who dispose of qualified low-income
buildings or interests therein during the pe-
riod January through December 2005.
Rev. Rul. 200567
In Rev. Rul. 9060, 19902 C.B.
3, the Internal Revenue Service provided
guidance to taxpayers concerning the gen-
eral methodology used by the Treasury
Department in computing the bond factor
amounts used in calculating the amount of
bond considered satisfactory by the Secre-
tary under 42(j)(6) of the Internal Rev-enue Code. It further announced that the
Secretary would publish in the Internal
Revenue Bulletin a table of bond factor
amounts for dispositions occurring during
each calendar month.
Rev. Proc. 9911, 19991 C.B. 275,
established a collateral program as an al-
ternative to providing a surety bond for
taxpayers to avoid or defer recapture of
the low-income housing tax credits under
42(j)(6). Under this program, taxpayer
may establish a Treasury Direct Accoun
and pledge certain United States Treasur
securities to the Internal Revenue Servic
as security.
This revenue ruling provides in Tabl1 the bond factor amounts for calculat
ing the amount of bond considered satis
factory under 42(j)(6) or the amount o
United States Treasury securities to pledg
in a Treasury Direct Account under Rev
Proc. 9911 for dispositions of qualifie
low-income buildings or interests therei
during the period January through Decem
ber 2005.
Table 1Rev. Rul. 200567
Monthly Bond Factor Amounts for Dispositions Expressed
As a Percentage of Total Credits
Calendar Year Building Placed in Service
or, if Section 42(f)(1) Election Was Made,
the Succeeding Calendar Year
Month of
Disposition
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Jan 05 14.99 27.92 39.03 48.55 56.77 56.71 56.86 57.15 57.52 58.00 58.83
Feb 05 14.99 27.92 39.03 48.55 56.77 56.59 56.74 57.04 57.41 57.89 58.72
Mar 05 14.99 27.92 39.03 48.55 56.77 56.47 56.63 56.93 57.30 57.79 58.61Apr 05 15.85 29.52 41.27 51.33 60.03 60.18 60.95 61.89 62.92 64.10 65.66
May 05 15.85 29.52 41.27 51.33 60.03 60.05 60.83 61.77 62.80 63.98 65.54
Jun 05 15.85 29.52 41.27 51.33 60.03 59.93 60.71 61.65 62.69 63.87 65.42
Jul 05 15.85 29.52 41.27 51.33 60.03 59.81 60.59 61.54 62.57 63.76 65.32
Aug 05 15.85 29.52 41.27 51.33 60.03 59.70 60.48 61.42 62.46 63.65 65.21
Sep 05 15.85 29.52 41.27 51.33 60.03 59.58 60.36 61.31 62.36 63.55 65.11
Oct 05 16.68 31.06 43.42 54.01 63.16 63.18 64.65 66.33 68.14 70.14 72.58
Nov 05 16.68 31.06 43.42 54.01 63.16 63.06 64.54 66.21 68.02 70.02 72.47
Dec 05 16.68 31.06 43.42 54.01 63.16 62.94 64.42 66.10 67.91 69.92 72.36
200543 I.R.B. 771 October 24, 200
-
8/14/2019 US Internal Revenue Service: irb05-43
4/88
Table 1 (contd)
Rev. Rul. 200567
Monthly Bond Factor Amounts for Dispositions Expressed
As a Percentage of Total Credits
Calendar Year Building Placed in Service
or, if Section 42(f)(1) Election Was Made,
the Succeeding Calendar Year
Month ofDisposition
2002 2003 2004 2005
Jan 05 59.92 61.22 62.49 62.68
Feb 05 59.80 61.09 62.33 62.68
Mar 05 59.69 60.97 62.19 62.68
Apr 05 67.52 69.62 71.64 72.55
May 05 67.40 69.48 71.49 72.55
Jun 05 67.28 69.36 71.35 72.55
Jul 05 67.17 69.24 71.23 72.55
Aug 05 67.06 69.12 71.12 72.55
Sep 05 66.96 69.02 71.02 72.55
Oct 05 75.38 78.45 81.49 83.98
Nov 05 75.27 78.34 81.38 83.98Dec 05 75.16 78.23 81.29 83.98
For a list of bond factor amounts ap-
plicable to dispositions occurring during
other calendar years, see: Rev. Rul.
983, 19981 C.B. 248; Rev. Rul.
20012, 20011 C.B. 255; Rev. Rul.
200153, 20012 C.B. 488; Rev. Rul.
200272, 20022 C.B. 759; Rev. Rul.
2003117, 20032 C.B. 1051; and Rev.
Rul. 2004100, 20042 C.B. 718.
DRAFTING INFORMATION
The principal author of this revenue
ruling is David McDonnell of the Office
of Associate Chief Counsel (Passthroughs
and Special Industries). For further in-
formation regarding this revenue ruling,
contact Mr. McDonnell at (202) 6223040
(not a toll-free call).
Section 864.Definitionsand Special Rules
26 CFR 1.8644: U.S. source income effectively con-
nected with U.S. business.
T.D. 9226
DEPARTMENT OF
THE TREASURYInternal Revenue Service26 CFR Part 1
Stock Held by ForeignInsurance Companies
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations relating to the determi-nation of income of foreign insurance
companies that is effectively connected
with the conduct of a trade or business
within the United States. The regulations
provide that the exception to the asset-use
test for stock shall not apply in determin-
ing whether the income, gain, or loss from
portfolio stock held by foreign insurance
companies constitutes effectively con-
nected income.
DATES: Effective Date: These regulations
are effective on October 3, 2005.
FOR FURTHER INFORMATION
CONTACT: Sheila Ramaswamy, (202)
6223870 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On June 25, 2004, a notice of proposed
rulemaking (REG11730704, 20042
C.B. 39) was published in the Federal
Register (69 FR 35543). No requests
for a public hearing were received, and no
public hearing was held. The IRS received
one written comment in response to the
notice of proposed rulemaking. After con-
sideration of the comment, the proposed
regulation is adopted without change.
Explanation of Provisions and
Summary of Comments
This Treasury decision adopts the lan-
guage of the proposed regulation without
change.
The IRS received one comment in re-
sponse to the proposed regulation. The
commentator requested further clarifica-
tion regarding what constitutes an insur-
ance company for federal income tax pur-
poses. The IRS believes the issue of what
October 24, 2005 772 200543 I.R.B.
-
8/14/2019 US Internal Revenue Service: irb05-43
5/88
constitutes an insurance company is out-
side the scope of this regulation, which
solely relates to the application of the as-
set-use test to stock held by foreign insur-
ance companies.
The commentator also expressed con-
cern about the interaction of the proposed
regulation with 1.8645(a), which pro-
vides, generally, that foreign source in-
come, such as a foreign-source dividend
or gain, cannot constitute U.S. effectively
connected income in circumstances in
which a U.S.-source dividend or gain
would not constitute U.S. effectively
connected income. Accordingly, the com-
mentator is concerned that the rule in
the regulations will also expand the cate-
gory of foreign-source dividends or gains
that may constitute effectively connected
income. That is true and the Treasury
Department and the IRS believe this is the
appropriate result.The IRS invited comments whether the
10 percent threshold provided in the pro-
posed regulation was an appropriate stan-
dard for determining whether stock is a
portfolio investment. The commentator
stated that it was possible for insurance
companies to make a strategic investment
in a corporation at a level below 10 percent
of thevote or value of thecorporation, such
as by purchasing a special class of shares
that conveyed the power to elect directors.
The commentator recommended creating a
rebuttable presumption of portfolio status.We do not believe that treating the 10
percent threshold as a rebuttable presump-
tion is appropriate. The 10 percent thresh-
old provides a reasonable method for iden-
tifying portfolio stock held by a branch of
a foreign life insurance company.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been deter-
mined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations, andbecause these regulations do not impose a
collection of information on small entities,
the provisions of the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) do not apply.
Pursuant to section 7805(f) of the Inter-
nal Revenue Code, the notice of proposed
rulemaking preceding this regulation was
submitted to the Chief Counsel for Advo-
cacy of the Small Business Administration
for comment on its impact on small busi-
ness.
Drafting Information
The principal author of this regulation
is Sheila Ramaswamy, Office of Associate
Chief Counsel (International). However,
other personnel from the IRS and Treasury
Department participated in their develop-
ment.
* * * * *
Proposed Amendment to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. In 1.8644, paragrap
(c)(2)(iii)(b) is revised to read as follows
1.8644 U.S. source income effectively
connected with U.S. business.
* * * * *
(c) * * *
(2) * * *(iii) * * *
(b) Stock held by foreign insuranc
companies. This paragraph (c)(2)(iii
shall not apply to stock of a corporation
(whether domestic or foreign) held by
foreign insurance company unless the for
eign insurance company owns 10 percen
or more of the total voting power or valu
of all classes of stock of such corpora
tion. For purposes of this section, sectio
318(a) shall be applied in determinin
ownership, except that in applying sectio
318(a)(2)(C), the phrase 10 percent iused instead of the phrase 50 percent.
* * * * *
Mark E. Matthews
Deputy Commissioner fo
Services and Enforcemen
Approved August 9, 2005.
Eric Solomon
Acting Deputy Assistant Secretar
for Tax Policy
(Filed by the Office of the Federal Register on Septembe30, 2005, 8:45 a.m., and published in the issue of the FederaRegister for October 3, 2005, 70 F.R. 57509)
200543 I.R.B. 773 October 24, 200
-
8/14/2019 US Internal Revenue Service: irb05-43
6/88
Part IV. Items of General Interest
Notice of ProposedRulemaking and Notice ofPublic Hearing
Miscellaneous Changes
to Collection Due ProcessProcedures Relating to Noticeand Opportunity for HearingUpon Filing of Notice ofFederal Tax Lien
REG15008802
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains pro-
posed amendments to the regulations relat-
ing to a taxpayers right to a hearing under
section 6320 of the Internal Revenue Code
of 1986 after the filing of a notice of Fed-
eral tax lien (NFTL). The proposed reg-
ulations make certain clarifying changes
in the way collection due process (CDP)
hearings are held and specify the period
during which a taxpayer may request an
equivalent hearing. The proposed regula-
tions affect taxpayers against whose prop-
erty or rights to property the Internal Rev-
enue Service (IRS) files a NFTL on or af-
ter January 19, 1999. This document also
contains a notice of public hearing on these
proposed regulations.
DATES: Written and electronic comments
must be received by December 15, 2005.
Outlines of topics to be discussed at the
public hearing scheduled for 10 a.m. on
January 19, 2006 must be received by De-
cember 29, 2005.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG15008802), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG15008802),
Couriers Desk, Internal Revenue Service,
1111 Constitution Avenue, NW, Wash-
ington, DC, or sent electronically, via the
IRS Internet site at www.irs.gov/regs or
via the Federal eRulemaking Portal at
www.regulations.gov (indicate IRS and
REG15008802). The public hearing
will be held in the IRS Auditorium, In-
ternal Revenue Building (7th Floor), 1111
Constitution Avenue, NW, Washington,DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
call Laurence K. Williams, 2026223600
(not a toll-free number); concerning
submissions and/or to be placed on the
building access list to attend the hearing,
call Robin Jones, 2026227180 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Regulations on Pro-
cedure and Administration (26 CFR part
301) relating to the provision of notice
under section 6320 of the Internal Rev-
enue Code to taxpayers of a right to a CDP
hearing (CDP Notice) after the IRS files
a NFTL. Final regulations (T.D. 8979,
20021 C.B. 466) were published on Jan-
uary 18, 2002 in the Federal Register (67
FR 2558). The final regulations imple-
mented certain changes made by section
3401 of the Internal Revenue Service Re-
structuring and Reform Act of 1998 (Pub-
lic Law 105206, 112 Stat. 685) (RRA
1998), including the addition of section
6320 to the Internal Revenue Code. The
final regulations affected taxpayers against
whose property or rights to property the
IRS files a NFTL.
Section 3401 of RRA 1998 also added
section 6330 to the Internal Revenue Code.
That statute provides for notice to taxpay-
ers of a right to a hearing before or, in lim-ited cases, after levy. A number of the
provisions in section 6330 concerning the
conduct and judicial review of a CDPhear-
ing are incorporated by reference in sec-
tion 6320. On January 18, 2002, final
regulations (T.D. 8980, 20021 C.B. 477)
under section 6330 were published in the
Federal Register (67 FR 2549) along with
the final regulations under section 6320.
Explanation of Provisions
A taxpayer is entitled to one CDP hear-
ing with respect to the tax and tax period
covered by a CDP Notice concerning a
levy or a CDP Notice concerning the fil-
ing of a NFTL. The IRS Office of Appeals
(Appeals) has conducted over 92,000 CDP
hearings and more than 30,000 equivalent
hearings since sections 6320 and 6330 be-
came effective for collection actions initi-
ated on and after January 19, 1999.
In general, the experience of the past six
years with CDP hearings has demonstrated
that there is a need for changes to allow
Appeals to effectively and fairly handle the
cases of taxpayers who raise issues of sub-
stance. Appeals has instituted many im-
provements in its processing of CDP cases
and has conducted extensive training in aneffort to provide careful, buttimely, review
of CDP cases, which currently are filed at
a rate of approximately 2,450 per month.
The proposed regulations, if adopted as
final regulations, will increase efficiency
without compromising the quality and fair-
ness of review.
In many CDP cases, significant time is
spent merely identifying the issues. Al-
though the Form 12153 used to request a
CDP hearing requires a taxpayer to state
a reason or reasons for disagreeing with
the NFTL filing, many taxpayers either donot supply that information, or raise new
issues during the CDP hearing process
not identified on the hearing request. De-
lays result while taxpayers provide new
supporting documentation and Appeals
personnel reconsider prior conclusions in
light of the new information. Cases of
other taxpayers pending in Appeals are
delayed because other work must be con-
stantly rescheduled.
Cases are also delayed when taxpayers
propose collection alternatives for which
they are not eligible. The IRS does not
consider offers in compromise or install-
ment agreements from taxpayers who have
failed to file required returns as of the date
the offer or the proposed installment agree-
ment is submitted. See Publication 594,
What You Should Know About the IRS
Collection Process (Rev. 22004). Sim-
ilarly, the IRS will not consider an offer in
compromise from an in-business taxpayer
unless the taxpayer has timely filed all re-
October 24, 2005 774 200543 I.R.B.
-
8/14/2019 US Internal Revenue Service: irb05-43
7/88
turns and timely made all Federal tax de-
posits for two consecutive quarters. See
Form 656, Offer in Compromise (Rev.
72004). The resources of Appeals are in-
effectively utilized arranging and conduct-
ing face-to-face conferences requested by
non-compliant taxpayers whose only com-
plaintis therejection of an offerto compro-
mise or installment agreement for which
they are not eligible.
Frivolous cases also cause unneces-
sary delays. During fiscal year 2004, 5.4
percent of the 32,226 CDP and equiva-
lent-hearing cases Appeals handled in-
volved taxpayers who were non-filers or
raised only frivolous issues. Cases raising
frivolous issues, in particular, consume a
disproportionately large amount of time,
because Appeals personnel must often
read lengthy, frivolous submissions in
search of any substantive issue buried
within. Delays also result when taxpayersuse face-to-face conferences as a venue
for frivolous oration and harassment of
Appeals personnel.
The proposed regulations attempt to ad-
dress these and other problems that have
become apparent during the first six years
of CDP practice. The proposed changes
are aimed at creating a more focused pro-
cedure that will allow Appeals to continue
to provide careful review of NFTL filings
as the volume of cases increases.
A taxpayer must request a CDP hearing
in writing. The current regulations requirethat a request for a CDP hearing include
the taxpayers name, address, and daytime
telephone number, and that the request be
dated and signed by either the taxpayer
or the taxpayers authorized representa-
tive. Section 301.63201(c)(2), Q&A-C1.
A Form 12153, Request for a Collection
Due Process Hearing, is included with
the CDP Notice sent to the taxpayer pur-
suant to section 6320. The Form 12153
requests (1) the taxpayers name, address,
daytime telephone number, and taxpayer
identification number (SSN or EIN), (2)the type of tax involved, (3) the tax period
at issue, (4) a statement that the taxpayer
requests a hearing with Appeals concern-
ing the filing of the NFTL, and (5) the rea-
son or reasons why the taxpayer disagrees
with the NFTL filing. Although taxpay-
ers are encouraged to use a Form 12153
in requesting a CDP hearing, the current
regulations do not require the use of Form
12153.
Section 301.63201(c)(2), A-C1, of the
proposed regulations requires taxpayers to
state their reasons for disagreement with
the NFTL filing whether or not a Form
12153 is used to request a CDP hearing.
In addition, a taxpayer who fails to sign
a timely CDP hearing request because the
request is made by a spouse or other unau-
thorized representative must affirm in writ-
ing that the request was originally submit-
ted on the taxpayers behalf. Failure to
provide the written affirmation within a
reasonable time after a request from Ap-
peals will result in the denial of a CDP
hearing for that taxpayer.
A CDP hearing is to be conducted by an
Appeals officer or employee who has had
no prior involvement with respect to the
tax for the tax periods to be covered by the
hearing, unless the taxpayer waives this
requirement. Section 301.63201(d)(2),
A-D4 of the current regulations providesthat prior involvement by an Appeals
officer or employee includes participation
or involvement in an Appeals hearing that
the taxpayer may have had with respect to
the tax and tax period shown on the CDP
Notice, other than a CDP hearing held
under either section 6320 or section 6330.
It is important that prior involvement
be construed in a manner that reasonably
protects against predisposition but at the
same time does not disqualify too broad
a range of Appeals personnel. A broad
standard of prior involvement wouldlead to uncertain application, could result
in the disqualification of an entire Appeals
office, many of which have small staffs,
and could make it difficult to conduct the
CDP hearing. Section 301.63201(d)(2),
A-D4 of the proposed regulations pro-
vides that prior involvement exists only
when the taxpayer, the tax liability and
the tax period shown on the CDP Notice
also were at issue in the prior non-CDP
hearing or proceeding, and the Appeals
officer or employee actually participated
in the prior hearing or proceeding. Exam-ples are provided in 301.63201(d)(3)
of the proposed regulations. Section
301.63201(d)(2), A-D7, of the proposed
regulations clarifies that a face-to-face
conference is merely one aspect of a CDP
hearing under section 6320 and is not by
itself the entire CDP hearing.
A-D7 of the proposed regulations also
provides that, in all cases, the Appeals
officer or employee will review the tax-
payers request for a CDP hearing, the cas
file, other written communications from
the taxpayer, and any notes of oral com
munications with the taxpayer or the tax
payers representative. If no face-to-fac
or telephonic conference is held, review o
those documents will constitute the CDP
hearing for purposes of section 6320(b).
A-D7 of the proposed regulations fur
ther clarifies that when a business taxpaye
is offered an opportunity for a face-to-fac
conference it will be held at the Appeal
office closest to the taxpayers principa
place of business. The current regulation
have been misinterpreted by some taxpay
ers as requiring the IRS to hold a face-to
face conference at the taxpayers principa
place of business. Q&A-D8 of the pro
posed regulations is new. It describes spe
cific circumstances in which Appeals wil
not hold a face-to-face conference with th
taxpayer or the taxpayers representativbecause a conference will serve no use
ful purpose. The experience of Appeal
is that although most taxpayers reques
face-to-face conferences, they are some
times difficult to schedule on a date and at
time that is convenient for the taxpayer. In
some of these cases, taxpayers or their rep
resentatives have used the scheduling of
face-to-face conference as a tactic to de
lay the IRSs collection efforts. In othe
cases, taxpayers have requested a face-to
face conference merely to raise frivolou
arguments concerning the Federal tax system or to request collection alternative
for which they do not qualify. Q&A-D
of the proposed regulations provides tha
a face-to-face conference need not be of
fered if the taxpayer or the taxpayers rep
resentative raises only frivolous argument
concerning the Federal tax system. Se
the IRS Internet site, www.irs.gov/pub/irs
utl/friv_tax.pdf, for examples of frivolou
arguments. A face-to-face conference als
will not be granted if the taxpayer propose
collection alternatives that would not b
available to other taxpayers in similar circumstances. A face-to-face conferenc
need not begranted if the taxpayer does no
provide in the written request for a CDP
hearing, as perfected, the required infor
mation set forth in A-C1(ii)(E) of para
graph (c)(2) of the proposed regulations.
In addition, a face-to-face conferenc
will not be held at the location closes
to the taxpayers residence or principa
place of business if all Appeals officers o
200543 I.R.B. 775 October 24, 200
-
8/14/2019 US Internal Revenue Service: irb05-43
8/88
employees at that location are considered
to have prior involvement as provided in
A-D4. In this case, the taxpayer will be of-
fered a hearing by telephone or correspon-
dence, or some combination thereof. The
taxpayer may be able to obtain a face-to-
face conference at the Appeals office clos-
est to the taxpayers residence or princi-
pal place of business under these circum-
stances if the taxpayer waives the require-
ment of section 6320(b)(3) concerning im-
partiality of the Appeals officer or em-
ployee. Appeals will offer the taxpayer a
face-to-face conference at another Appeals
office if in the exercise of itsdiscretion Ap-
peals would have offered the taxpayer a
face-to-face conference at the original lo-
cation.
With the foregoing exceptions, it is
anticipated that a face-to-face conference
will ordinarily be offered with respect to
any relevant issues or collection alterna-tives for which the taxpayer qualifies.
Sections 301.63201(e)(1) and
301.63201(e)(3), A-E2 and A-E7 have
been changed to more closely follow the
language of section 6330(c)(2)(B), made
applicable to section 6320 by section
6320(c). These changes are necessary
because these regulations have been mis-
interpreted as defining the underlying tax
liability that may be considered at the
CDP hearing under section 6330(c)(2)(B)
to be the tax liability listed on the CDP
Notice. The intent of the existing regu-lations, which refer to tax liability on the
CDP Notice, is that taxpayers may only
challenge taxes or tax periods listed on
the CDP Notice, not to supply a substan-
tive definition of underlying tax liability.
Section 301.63201(e)(3), A-E6 has been
amended to clarify that taxpayers who
receive CDP hearings can only qualify for
collection alternatives available generally
to taxpayers in similar circumstances.
The experience of the past six years has
revealed that many taxpayers raise an is-
sue with Appeals but fail to furnish anydocumentation or evidence with respect
to the issue despite being given a reason-
able period to do so. For example, a tax-
payer may request an installment agree-
ment, but when an Appeals officer or em-
ployee requests financial data necessary
to determine eligibility for the installment
agreement, the taxpayer may not comply
with the request. Or a taxpayer may dis-
pute liability for a tax period by claim-
ing entitlement to deductions, but provide
no substantiation for the deductions in re-
sponse to requests from Appeals. Current
301.63201(f)(2), A-F5 provides that a
taxpayer may not seek judicial review of
an issue that he has not raised during the
CDP hearing. A-F5 is revised to clarify
that in order to obtain judicial review, a
taxpayer must not only bring the issue to
the attention of Appeals but must also sub-
mit, if requested, evidence with respect to
that issue. Under revised A-F5, if the tax-
payer does not provide Appeals any evi-
dence with respect to the issue after being
given a reasonable opportunity to submit
such evidence, then he may not ask a court
to consider the issue.
There has been some confusion about
what documents Appeals should retain,
and what notations the Appeals officer or
employee conducting the hearing should
make, in order to provide a judicially re-viewable administrative record. A new
Q&A-F6 has been added to specify the
contents of the administrative record re-
quired for court review.
The IRS receives a number of tardy
requests for CDP hearings. The changes
to 301.63201(i)(2) explain how these
requests will be treated. The proposed
amendments to the regulations add a new
Q&A-I1 to 301.63201(i)(2) to explain
that a taxpayer must request an equiva-
lent hearing in writing. A taxpayer may
obtain an equivalent hearing if the 30-dayperiod described in section 6320(a)(3) for
requesting a CDP hearing has expired.
Unlike an Appeals determination in a
CDP hearing, the Appeals decision in an
equivalent hearing is not reviewable in
court. Under new Q&A-I1, the IRS is not
required to treat a late-filed CDP request
as a request for an equivalent hearing.
Section 301.63201(c)(2), A-C7 has been
amended to require that the taxpayer be
notified of the right to an equivalent hear-
ing in all cases in which a tardy request for
a CDP hearing is received. It is expectedthat the IRS will either send the taxpayer a
letter or orally inform the taxpayer that the
CDP hearing request is untimely and ask if
the taxpayer wishes to have an equivalent
hearing. If the taxpayer elects to have an
equivalent hearing, the IRS will treat the
CDP hearing request as a request for an
equivalent hearing without requiring the
taxpayer to make an additional written
request.
Current Q&A-I1 through I5 are
renumbered Q&A-I2 through I6. The
proposed regulations add Q&A-I7 to
301.63201(i)(2) to clarify that the pe-
riod during which a taxpayer may obtain
an equivalent hearing is not indefinite.
The equivalent hearing procedure is not
provided by statute but, consistent with
the legislative history of RRA 1998, was
adopted in order to accommodate tax-
payers who failed timely to exercise their
right to a CDP hearing. The equivalent
hearing was meant to occur near the time
a CDP hearing held pursuant to a timely
request would have occurred, because it
was meant to address the same matters
that would have been addressed at a CDP
hearing. The procedure was not meant
to provide a hearing right that could be
exercised months or years after the cir-
cumstances that precipitated the filing of
the NFTL have passed. A hearing beforeAppeals at a later time may be obtained
under the Collection Appeals Program.
Therefore, proposed Q&A-I7 limits to one
year the period during which a taxpayer
may request an equivalent hearing. The
period commences the day after the end of
the five business day period following the
filing of the NFTL, described in section
6320(a)(2).
Because the time for requesting an
equivalent hearing will be limited, the
proposed regulations add new Q&A-I8,
Q&A-I9, Q&A-I10 and Q&A-I11 to301.63201(i)(2) to provide the same
rules governing mailing, delivery and de-
termination of timeliness that apply to
requests for CDP hearings. Unlike exist-
ing 301.63201(c)(2), A-C6, new A-I10
does not identify the officials to whom
to send an equivalent hearing request if
the CDP Notice does not specify where
to send the request. Because the identity
and the address of the person to whom
the request should be sent may change in
the future, taxpayers will be able to obtain
more current information by calling the1800 number listed in A-I10. Section
301.63201(c)(2), A-C6 also has been
revised in the proposed regulations to pro-
vide that taxpayers should call the 1800
number to obtain the address to which the
CDP hearing request should be sent.
The proposed regulations are effective
the date 30 days after final regulations are
published in the Federal Register with
respect to requests for CDP hearings or
October 24, 2005 776 200543 I.R.B.
-
8/14/2019 US Internal Revenue Service: irb05-43
9/88
equivalent hearings made on or after the
date 30 days after final regulations are pub-
lished in the Federal Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866. Therefore, a regula-tory assessment is not required. It also has
been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these reg-
ulations, and because the regulations do
not impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Inter-
nal Revenue Code, this notice of proposed
rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on itsimpact on small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any electronic and writ-
ten comments that are submitted timely to
the IRS. TheIRS and Treasury Department
specifically request comments on the clar-
ity of the proposed regulations and how
they may be made easier to understand.
All comments will be available for publicinspection and copying.
A public hearing has been scheduled
for January 19, 2006, at 10 a.m. in the IRS
Auditorium, Internal Revenue Building
(7th Floor), 1111 Constitution Avenue,
NW, Washington, DC. All visitors must
present photo identification to enter the
building. Because of access restrictions,
visitors will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts. For in-
formation about having a visitors name
placed on the building access list to attendthe hearing, see the FOR FURTHER IN-
FORMATION CONTACT caption.
An outline of the topics to be discussed
and the time to be devoted to each topic
must be submitted by any person who
wishes to present oral comments at the
hearing. Outlines must be received by
December 29, 2005.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. A period of 10 minutes
will be allotted to each person for making
comments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving requests to speak
has passed. Copies of the agenda will be
available free of charge at the hearing.
Drafting Information
The principal author of these regula-
tions is Laurence K. Williams, Office of
Associate Chief Counsel, Procedure and
Administration (Collection, Bankruptcy
and Summonses Division).
* * * * *
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 301 is pro-
posed to be amended as follows:
PART 301PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 continues to read, in part, as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.63201 is proposed
to be amended as follows:
1. Paragraph (c)(2) A-C1, Q&A-C6
and A-C7 are revised.
2. Paragraph (d)(2) A-D4 and A-D7 are
revised.3. Paragraph (d)(2) Q&A-D8 is added.
4. Paragraph (d)(3) is added.
5. Paragraph (e)(1) is revised.
6. Paragraph (e)(3) A-E2, A-E6 and
A-E7 are revised.
7. Paragraph (f)(2) A-F5 is revised
8. Paragraph (f)(2) Q&A-F6 is added.
9. Paragraph (i)(2) Q&A-I1 through
Q&A-I5 are renumbered Q&A-I2 through
Q&A-I6, a new paragraph (i)(2) Q&A-I1
and new paragraphs Q&A-I7 through
Q&A-I11 are added.
10. Paragraph (j) is revised.
301.63201 Notice and opportunity for
hearing upon filing of notice of Federal
tax lien.
* * * * *
(c) * * *
(2) * * *
A-C1. (i) The taxpayer must make a
request in writing for a CDP hearing. The
request for a CDP hearing shall include th
information specified in A-C1(ii) of thi
paragraph (c)(2). See A-D7 and A-D8 o
paragraph (d)(2).
(ii) The written request for a CDP hear
ing must be dated and must include the fol
lowing information:
(A) The taxpayers name, address, day
time telephone number (if any), and tax
payer identification number (SSN or EIN)
(B) The type of tax involved.
(C) The tax period at issue.
(D) A statement that the taxpayer re
quests a hearing with Appeals concernin
the filing of the NFTL.
(E) The reason or reasons why th
taxpayer disagrees with the filing of th
NFTL.
(F) The signature of the taxpayer or th
taxpayers authorized representative.
(iii) The taxpayer must perfect an
timely written request for a CDP hearinthat does not provide the required informa
tion set forth in A-C1(ii) of this paragraph
within a reasonable period of time after
request from the IRS.
(iv) Taxpayers are encouraged to us
a Form 12153, Request for a Collectio
Due Process Hearing, in requesting
CDP hearing so that the request can b
readily identified and forwarded to Ap
peals. Taxpayers may obtain a copy o
Form 12153 by contacting the IRS offic
that issued the CDP Notice, by down
loading a copy from the IRS Internet sitewww.irs.gov/pub/irs-pdf/f12153.pdf, or b
calling, toll-free, 18008293676.
(v) The taxpayer must affirm any timel
written request for a CDP hearing whic
is signed or alleged to have been signed
on the taxpayers behalf by the taxpayer
spouse or other unauthorized representa
tive by filing, within a reasonable perio
of time after a request from the IRS,
signed, written affirmation that the reques
was originally submitted on the taxpayer
behalf. If the affirmation is not filed withi
a reasonable period of time after a requestthe CDP hearing request will be denie
with respect to the non-signing taxpayer.
* * * * *
Q-C6. Where must the written reques
for a CDP hearing be sent?
A-C6. The written request for a CDP
hearing must be sent, or hand delivered (i
permitted), to the IRS office and addres
as directed on the CDP Notice. If the ad
200543 I.R.B. 777 October 24, 200
-
8/14/2019 US Internal Revenue Service: irb05-43
10/88
dress of that office does not appear on the
CDP Notice, the taxpayer should obtain
the address of the office to which the writ-
ten request should be sent or hand deliv-
ered by calling, toll-free, 18008291040
and providing the taxpayers identification
number (SSN or TIN).
* * * * *
A-C7. If the taxpayer does not request aCDP hearing in writing within the 30-day
period that commences on the day after
the end of the five business day notifi-
cation period, the taxpayer foregoes the
right to a CDP hearing under section 6320
with respect to the unpaid tax and tax pe-
riods shown on the CDP Notice. If the re-
quest for CDP hearing is received after the
30-dayperiod, thetaxpayerwill be notified
of the untimely request and of the right to
an equivalent hearing. See paragraph (i) of
this section.
* * * * *
(d) * * *
(2) * * *
A-D4. Prior involvement by an Ap-
peals officer or employee includes partici-
pation or involvement in an Appeals hear-
ing (other than a CDP hearing held un-
der either section 6320 or section 6330)
that the taxpayer may have had with re-
spect to the tax and tax period shown on
the CDP Notice. Prior involvement exists
only when the taxpayer, the tax liability
and the tax period at issue in the CDP hear-ing also were at issue in the prior non-CDP
hearing or proceeding, and the Appeals of-
ficer or employee actually participated in
the prior hearing or proceeding.
* * * * *
A-D7. Except as provided in A-D8
of this paragraph (d)(2), a taxpayer who
presents in the CDP hearing request rel-
evant, non-frivolous reasons for disagree-
ment with the NFTL filing will ordinarily
be offered an opportunity for a face-to-face
conference at the Appeals office closest
to the taxpayers residence. A businesstaxpayer will ordinarily be offered an op-
portunity for a face-to-face conference at
the Appeals office closest to the taxpayers
principal place of business. If that is not
satisfactory to the taxpayer, the taxpayer
will be given an opportunity for a hear-
ing by telephone or by correspondence. In
all cases, the Appeals officer or employee
will review the case file, which includes
the taxpayers request for a CDP hearing,
any other written communications from
the taxpayer or the taxpayers authorized
representative, and any notes made by Ap-
peals officers or employees of any oral
communications with the taxpayer or the
taxpayers authorized representative. If
no face-to-face or telephonic conference or
correspondence hearing is held, review of
those documents will constitute the CDP
hearing for purposes of section 6320(b).
Q-D8. In what circumstances will
a face-to-face CDP conference not be
granted?
A-D8. A taxpayer is not entitled to
a face-to-face CDP conference at a loca-
tion other than as provided in A-D7 of this
paragraph (d)(2) and this A-D8. If all Ap-
peals officers or employees at the loca-
tion provided for in A-D7 of this paragraph
have had prior involvement with the tax-
payer as provided in A-D4 of this para-
graph, the taxpayer will not be offered aface-to-face meeting at that location, un-
less the taxpayer elects to waive the re-
quirement of section 6320(b)(3). The tax-
payer will be offered a face-to-face confer-
ence at another Appeals office if Appeals
in the exercise of its discretion would have
offered the taxpayer a face-to-face confer-
ence at the location provided in A-D7. A
face-to-face CDP conference concerning a
taxpayers underlying liability will not be
granted if the request for a hearing or other
taxpayer communication indicates that the
taxpayer wishes only to raise irrelevant orfrivolous issues concerning that liability.
A face-to-face CDP conference concern-
ing a collection alternative, such as an in-
stallment agreement or an offer to compro-
mise liability, will not be granted unless
the alternative would be available to other
taxpayers in similar circumstances. For
example, because the IRS does not con-
sider offers to compromise from taxpay-
ers who have not filed required returns or
have not made certain required deposits of
tax, as set forth in Form 656, Offer in
Compromise, no face-to-face conferencewill be offered to a taxpayer who wishes
to make an offer to compromise but has not
fulfilled those obligations. A face-to-face
conference need not be granted if the tax-
payer does not provide the required infor-
mation set forth in A-C1(ii)(E) of para-
graph (c)(2). See also A-C1(iii) of para-
graph (c)(2).
(3) Examples. The following examples
illustrate the principles of this paragraph
(d): Example 1. Individual A timely requests a CDP
hearing concerning a NFTL filed with respect to As
1998income tax liability. Appeals employee B previ-
ously conducted a CDP hearing regarding a proposed
levy forthe 1998 incometax liability assessed against
individual A. Because employee Bs only prior in-
volvement with individual As 1998 income tax li-
ability was in connection with a section 6330 CDPhearing, employee B may conduct the CDP hearing
under section 6320 involving the NFTL filed for the
1998 income tax liability.
Example 2. Individual C timely requests a CDP
hearing concerning a NFTL filed with respect to Cs
1998 income tax liability assessed against individ-
ual C. Appeals employee D previously conducted a
Collection Appeals Program (CAP) hearing regard-
ing a NFTL filed with respect to Cs 1998 income
tax liability. Because employee Ds prior involve-
ment with individual Cs 1998 income tax liability
wasin connection with a non-CDPhearing, employee
D may not conduct the CDP hearing under section
6320 unless individual C waives the requirement that
the hearing will be conducted by an Appeals officeror employee who has had no prior involvement with
respect to Cs 1998 income tax liability.
Example 3. Same facts as in Example 2, except
that the prior CAP hearing only involved individual
Cs 1997 income tax liability and employment tax li-
abilities for 1998 reported on Form 941. Employee
D would not be considered to have prior involvement
because the prior CAP hearing in which she partici-
pated did not involve individual Cs 1998 income tax
liability.
Example 4. Appeals employee F is assigned to a
CDP hearing concerning a NFTL filed with respect
to a trust fund recovery penalty (TFRP) assessed pur-
suant to section 6672 against individual E. Appeals
employee F participated in a prior CAP hearing in-volving individual Es 1999 income tax liability, and
participated in a CAP hearing involving the employ-
ment taxes of business entity X, which incurred the
employment tax liability to which the TFRP assessed
against individual E relates. Appeals employee F
would not be considered to have prior involvement
because the prior CAP hearings in which he partici-
pated did not involve the TFRP assessed against in-
dividual E.
Example 5. Appeals employee G is assigned to a
CDP hearing concerning a NFTL filed with respect
to a TFRP assessed pursuant to section 6672 against
individual H. In preparing for the CDP hearing, Ap-
peals employee G reviews the Appeals case file con-
cerning the prior CAP hearing involving the TFRP
assessed pursuant to section 6672 against individual
H. Appeals employee G is not deemed to have par-
ticipated in the previous CAP hearing involving the
TFRP assessed against individual H by such review.
(e) Matters considered at CDP hear-
ing(1) In general. Appeals has the
authority to determine the validity, suffi-
ciency, and timeliness of any CDP Notice
given by the IRS and of any request for a
CDP hearing that is made by a taxpayer.
Prior to issuance of a determination, Ap-
October 24, 2005 778 200543 I.R.B.
-
8/14/2019 US Internal Revenue Service: irb05-43
11/88
peals is required to obtain verification
from the IRS office collecting the tax that
the requirements of any applicable law or
administrative procedure have been met.
The taxpayer may raise any relevant issue
relating to the unpaid tax at the hearing,
including appropriate spousal defenses,
challenges to the appropriateness of the
NFTL filing, and offers of collection al-
ternatives. The taxpayer also may raise
challenges to the existence or amount of
the underlying liability for any tax period
specified on the CDP Notice if the tax-
payer did not receive a statutory notice
of deficiency for that tax liability or did
not otherwise have an opportunity to dis-
pute the tax liability. Finally, the taxpayer
may not raise an issue that was raised and
considered at a previous CDP hearing un-
der section 6330 or in any other previous
administrative or judicial proceeding if
the taxpayer participated meaningfully insuch hearing or proceeding. Taxpayers
will be expected to provide all relevant in-
formation requested by Appeals, including
financial statements, for its consideration
of the facts and issues involved in the
hearing.
* * * * *
(3) * * *
A-E2. A taxpayer is entitled to chal-
lenge the existence or amount of the under-
lying liability for any tax period specified
on the CDP Notice if the taxpayer did not
receive a statutory notice of deficiency forsuch liability or did not otherwise have an
opportunity to dispute such liability. Re-
ceipt of a statutory notice of deficiency for
this purpose means receipt in time to peti-
tion the Tax Court for a redetermination of
the deficiency determined in the notice of
deficiency. An opportunity to dispute the
underlying liability includes a prior oppor-
tunity for a conference with Appeals that
was offered either before or after the as-
sessment of the liability.
* * * * *A-E6. Collection alternatives include,
for example, a proposal to withdraw the
NFTL in circumstances that will facilitate
the collection of the tax liability, an in-
stallment agreement, an offer to compro-
mise, the posting of a bond, or the sub-
stitution of other assets. A collection al-
ternative is not available unless the alter-
native would be available to other taxpay-
ers in similar circumstances. For example,
the IRS does not consider an offer to com-
promise made by a taxpayer who, at the
time of the CDP hearing, has not filed re-
quired returns or has not made certain re-
quired deposits of tax, as set forth in Form
656, Offer in Compromise. The collec-
tion alternative of an offer to compromise
would not be available to such a taxpayer
in a CDP hearing.
* * * * *
A-E7. The taxpayer may raise appro-
priate spousal defenses, challenges to the
appropriateness of theNFTL filing, and of-
fers of collection alternatives. The exis-
tence or amount of the underlying liability
for any tax period specified in the CDP No-
tice may be challenged only if the taxpayer
did not already have an opportunity to dis-
pute the tax liability. If the taxpayer previ-
ously received a CDP Notice under section
6330 with respect to the same tax and tax
period and did not request a CDP hearingwith respect to that earlier CDP Notice, the
taxpayer has already had an opportunity to
dispute the existence or amount of the un-
derlying tax liability.
* * * * *
(f) * * *
(2) * * *
A-F5. In seeking Tax Court or district
court review of a Notice of Determination,
the taxpayer can only ask the court to con-
sider an issue, including a challenge to the
underlying tax liability, that was properlyraised in the taxpayers CDP hearing. An
issue is not properly raised if the taxpayer
fails to request consideration of the issue
by Appeals, or if consideration is requested
but the taxpayer fails to present to Appeals
any evidence with respect to that issue af-
ter being given a reasonable opportunity to
present such evidence.
Q-F6. What is the administrative record
for purposes of court review?
A-F6. The case file, including written
communications and information from
the taxpayer or the taxpayers authorizedrepresentative submitted in connection
with the CDP hearing, notes made by an
Appeals officer or employee of any oral
communications with the taxpayer or the
taxpayers authorized representative and
memoranda created by the Appeals officer
or employee in connection with the CDP
hearing, and any other documents or ma-
terials relied upon by the Appeals officer
or employee in making the determination
under section 6330(c)(3), will constitut
the record in any court review of the No
tice of Determination issued by Appeals.
* * * * *
(i) * * *
(2) * * *
Q-I1. What must a taxpayer do to ob
tain an equivalent hearing?
A-I1. (i) A request for an equivalenhearing must be made in writing. A writ
ten request in any form that requests an
equivalent hearing will be acceptable if i
includes the information required in para
graph (ii) of this A-I1.
(ii) The request must be dated and mus
include the following information:
(A) The taxpayers name, address, day
time telephone number (if any), and tax
payer identification number (SSN or EIN)
(B) The type of tax involved.
(C) The tax period at issue.
(D) A statement that the taxpayer is re
questing an equivalent hearing with Ap
peals concerning the filing of the NFTL.
(E) The reason or reasons why th
taxpayer disagrees with the filing of th
NFTL.
(F) The signature of the taxpayer or th
taxpayers authorized representative.
(iii) The taxpayer must perfect an
timely written request for an equivalen
hearing that does not provide the required
information set forth in paragraph (ii) o
this A-I1 within a reasonable period otime after a request from the IRS. If the re
quested information is not provided withi
a reasonable period of time, the taxpayer
equivalent hearing request will be denied
(iv) The taxpayer must affirm an
timely written request for an equivalen
hearing that is signed or alleged to hav
been signed on the taxpayers behalf by th
taxpayers spouse or other unauthorize
representative, and that otherwise meet
the requirements set forth in paragraph (ii
of this A-I1, by the taxpayers spouse o
any other representative, by filing, withia reasonable time after a request from th
IRS, a signed written affirmation that th
request was originally submitted on th
taxpayers behalf. If the affirmation i
not filed within a reasonable period o
time, the equivalent hearing request wil
be denied with respect to the non-signin
taxpayer.
* * * * *
200543 I.R.B. 779 October 24, 200
-
8/14/2019 US Internal Revenue Service: irb05-43
12/88
Q-I7. When must a taxpayer request an
equivalent hearing with respect to a CDP
Notice issued under section 6320?
A-I7. A taxpayer must submit a written
request for an equivalent hearing within
the one-year period commencing the day
after the end of the five-business-day pe-
riod following the filing of the NFTL. This
period is slightly different from the pe-
riod for submitting a written request for an
equivalent hearing with respect to a CDP
Notice issued under section 6330. For a
CDP Notice issued under section 6330, a
taxpayer must submit a written request for
an equivalent hearing within the one-year
period commencing the day after the date
of the CDP Notice issued under section
6330.
Q-I8. How will the timeliness of a tax-
payers written request for an equivalent
hearing be determined?
A-I8. The rules and regulations undersection 7502 and section 7503 will apply to
determine the timeliness of the taxpayers
request for an equivalent hearing, if prop-
erly transmitted and addressed as provided
in A-I10 of this paragraph (i)(2).
Q-I9. Is the one-year period within
which a taxpayer must make a request for
an equivalent hearing extended because
the taxpayer resides outside the United
States?
A-I9. No. All taxpayers who want an
equivalent hearing concerning the filing of
the NFTL must request the hearing withinthe one-year period commencing the day
after the end of the five-business-day pe-
riod following the filing of the NFTL.
Q-I10. Where must the written request
for an equivalent hearing be sent?
A-I10. The written request for an
equivalent hearing must be sent, or hand
delivered (if permitted), to the IRS office
and address as directed on the CDPNotice.
If the address of the issuing office does not
appear on the CDP Notice, the taxpayer
should obtain the address of the office to
which the written request should be sentor hand delivered by calling, toll-free,
18008291040 and providing the tax-
payers identification number (SSN or
EIN).
Q-I11. What will happen if the tax-
payer does not request an equivalent hear-
ing in writing within the one-year period
commencing the day after the end of the
five-business-day period following the fil-
ing of the NFTL?
A-I11. If the taxpayer does not request
an equivalent hearing with Appeals within
the one-year period commencing the day
after the end of the five-business-day pe-
riod following the filing of the NFTL, the
taxpayer foregoes the right to an equiva-
lent hearing with respect to the unpaid tax
and tax periods shown on the CDP Notice.
The taxpayer, however, may seek recon-
sideration by the IRS office collecting the
tax, assistance from the National Taxpayer
Advocate, or an administrative hearing be-
fore Appeals under its Collection Appeals
Program or any successor program.
* * * * *
(j) Effective date. This section is appli-
cable the date 30 days after final regula-
tions are published in the Federal Regis-
ter with respect to requests made for CDP
hearings or equivalent hearings on or after
the date 30 days after final regulations are
published in the Federal Register.
Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on September15, 2005, 8:45 a.m., and published in the issue of the FederalRegister for September 16, 2005, 70 F.R. 54681)
Notice of ProposedRulemaking and Notice ofPublic Hearing
Miscellaneous Changesto Collection Due ProcessProcedures Relating to Noticeand Opportunity for HearingPrior to Levy
REG15009102
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains pro-
posed amendments to the regulations relat-
ing to a taxpayers right to a hearing be-
fore or after levy under section 6330 of the
Internal Revenue Code of 1986. The pro-
posed regulations make certain clarifying
changes in the way collection due process
(CDP) hearings are held and specify the
period during which a taxpayer may re-
quest an equivalent hearing. The proposed
regulations affect taxpayers against whose
property or rights to property the Internal
Revenue Service (IRS) intends to levy on
or after January 19, 1999. This document
also contains a notice of public hearing on
these proposed regulations.
DATES: Written and electronic commentsmust be received by December 15, 2005.
Outlines of topics to be discussed at the
public hearing scheduled for 10 a.m. on
January 19, 2006, must be received by De-
cember 29, 2005.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG15009102), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG15009102),
Couriers Desk, Internal Revenue Service,
1111 Constitution Avenue, NW, Wash-
ington, DC, or sent electronically, via the
IRS Internet site at www.irs.gov/regs or
via the Federal eRulemaking Portal at
www.regulations.gov (indicate IRS and
REG15009102). The public hearing
will be held in the IRS Auditorium, In-
ternal Revenue Building (7th Floor), 1111
Constitution Avenue, NW, Washington,
DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
call Laurence K. Williams, 2026223600
(not a toll-free number). Concerning
submissions and/or to be placed on the
building access list to attend the hearing,
call Robin Jones, 2026227180 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Regulations on Pro-
cedure and Administration (26 CFR part
301) relating to the provision of notice
under section 6330 of the Internal Rev-
enue Code to taxpayers of a right to a CDP
hearing (CDP Notice) before levy. Final
regulations (T.D. 8980, 20021 C.B. 477)
were published on January 18, 2002 in the
Federal Register (67 FR 2549). The final
October 24, 2005 780 200543 I.R.B.
-
8/14/2019 US Internal Revenue Service: irb05-43
13/88
regulations implemented certain changes
made by section 3401 of the Internal Rev-
enue Service Restructuring and Reform
Act of 1998 (Public Law 105206, 112
Stat. 685) (RRA 1998), including the
addition of section 6330 to the Internal
Revenue Code. The final regulations af-
fected taxpayers against whose property or
rights to property the IRS intends to levy.
Section 3401 of RRA 1998 also added
section 6320 to the Internal Revenue Code.
That statute provides for notice to taxpay-
ers of a right to a hearing after the filing
of a notice of Federal tax lien (NFTL). A
number of the provisions in section 6330
concerning the conduct and judicial review
of a CDP hearing are incorporated by refer-
ence in section 6320. On January 18, 2002,
final regulations (T.D. 8979, 20021 C.B.
466) under section 6320 were published in
the Federal Register (67 FR 2558) along
with the final regulations under section6330.
Explanation of Provisions
A taxpayer is entitled to one CDP hear-
ing with respect to the tax and tax period
covered by a CDP Notice concerning a
levy or a CDP Notice concerning the fil-
ing of a NFTL. The IRS Office of Appeals
(Appeals) has conducted over 92,000 CDP
hearings and more than 30,000 equivalent
hearings since sections 6320 and 6330 be-
came effective for collection actions initi-ated on and after January 19, 1999.
In general, the experience of the past six
years with CDP hearings has demonstrated
that there is a need for changes to allow
Appeals to effectively and fairly handle the
cases of taxpayers who raise issues of sub-
stance. Appeals has instituted many im-
provements in its processing of CDP cases
and has conducted extensive training in an
effort to provide careful, but timely, review
of CDP cases, which currently are filed at
a rate of approximately 2,450 per month.
The proposed regulations, if adopted asfinal regulations, will increase efficiency
without compromising the quality and fair-
ness of review.
In many CDP cases, significant time is
spent merely identifying the issues. Al-
though the Form 12153 used to request a
CDP hearing requires a taxpayer to state a
reason or reasons for disagreeing with the
proposed levy, many taxpayers either do
not supply that information, or raise new
issues during the CDP hearing process
not identified on the hearing request. De-
lays result while taxpayers provide new
supporting documentation and Appeals
personnel reconsider prior conclusions in
light of the new information. Cases of
other taxpayers pending in Appeals are
delayed because other work must be con-
stantly rescheduled.
Cases are also delayed when taxpayers
propose collection alternatives for which
they are not eligible. The IRS does not
consider offers in compromise or install-
ment agreements from taxpayers who have
failed to file required returns as of the date
the offeror the proposed installment agree-
ment is submitted. See Publication 594,
What You Should Know About the IRS
Collection Process (Rev. 22004). Sim-
ilarly, the IRS will not consider an offer in
compromise from an in-business taxpayer
unless the taxpayer has timely filed all re-turns and timely made all Federal tax de-
posits for two consecutive quarters. See
Form 656, Offer in Compromise (Rev.
72004). The resources of Appeals are in-
effectively utilized arranging and conduct-
ing face-to-face conferences requested by
non-compliant taxpayers whose only com-
plaint is the rejection of an offer to compro-
mise or installment agreement for which
they are not eligible.
Frivolous cases also cause unneces-
sary delays. During fiscal year 2004, 5.4
percent of the 32,226 CDP and equiva-lent-hearing cases Appeals handled in-
volved taxpayers who were non-filers or
raised only frivolous issues. Cases raising
frivolous issues, in particular, consume a
disproportionately large amount of time,
because Appeals personnel must often
read lengthy, frivolous submissions in
search of any substantive issue buried
within. Delays also result when taxpayers
use face-to-face conferences as a venue
for frivolous oration and harassment of
Appeals personnel.
The proposed regulations attempt to ad-dress these and other problems that have
become apparent during the first six years
of CDP practice. The proposed changes
are aimed at creating a more focused pro-
cedure that will allow Appeals to continue
to provide careful review of proposed
levies as the volume of cases increases.
A taxpayer must request a CDP hearing
in writing. The current regulations require
that a request for a CDP hearing include
the taxpayers name, address, and daytim
telephone number, and that the request b
dated and signed by either the taxpaye
or the taxpayers authorized representa
tive. Section 301.63301(c)(2), Q&A-C1
A Form 12153, Request for a Collectio
Due Process Hearing, is included wit
the CDP Notice sent to the taxpayer pur
suant to section 6330. The Form 1215
requests (1) the taxpayers name, address
daytime telephone number, and taxpaye
identification number (SSN or EIN), (2
the type of tax involved, (3) the tax pe
riod at issue, (4) a statement that the tax
payer requests a hearing with Appeals con
cerning the proposed levy, and (5) the rea
son or reasons why the taxpayer disagree
with the proposed levy. Although taxpay
ers are encouraged to use a Form 1215
in requesting a CDP hearing, the curren
regulations do not require the use of Form
12153.Section 301.63301(c)(2), A-C1, of th
proposed regulations requires taxpayers t
state their reasons for disagreement wit
the proposed levy whether or not a Form
12153 is used to request a CDP hearing
In addition, a taxpayer who fails to sign
a timely CDP hearing request because th
request is made by a spouse or other unau
thorized representative must affirm in writ
ing that the request was originally submit
ted on the taxpayers behalf. Failure t
provide the written affirmation within
reasonable time after a request from Appeals will result in the denial of a CDP
hearing for that taxpayer.
A CDP hearing is to be conducted by a
Appeals officer or employee who has ha
no prior involvement with respect to th
tax for the tax periods to be covered by th
hearing, unless the taxpayer waives thi
requirement. Section 301.63301(d)(2
A-D4 of the current regulations provide
that prior involvement by an Appeal
officer or employee includes participatio
or involvement in an Appeals hearing tha
the taxpayer may have had with respect tthe tax and tax period shown on the CDP
Notice, other than a CDP hearing hel
under either section 6320 or section 6330
It is important that prior involvement
be construed in a manner that reasonabl
protects against predisposition but at th
same time does not disqualify too broa
a range of Appeals personnel. A broa
standard of prior involvement woul
lead to uncertain application, could resul
200543 I.R.B. 781 October 24, 200
-
8/14/2019 US Internal Revenue Service: irb05-43
14/88
in the disqualification of an entire Appeals
office, many of which have small staffs,
and could make it difficult to conduct the
CDP hearing. Section 301.63301(d)(2),
A-D4 of the proposed regulations pro-
vides that prior involvement exists only
when the taxpayer, the tax liability and the
tax period shown on the CDP Notice also
were at issue in the prior non-CDP hearing
or proceeding, and the Appeals officer
or employee actually participated in the
prior hearing or proceeding. Examples
are provided in 301.63301(d)(3) of the
proposed regulations.
Section 301.63301(d)(2), A-D7, of the
proposed regulations clarifies that a face-
to-face conference is merely one aspect of
a CDP hearing under section 6330 and is
not by itself the entire CDP hearing.
A-D7 of the proposed regulations also
provides that, in all cases, the Appeals
officer or employee will review the tax-payers request for a CDP hearing, the case
file, other written communications from
the taxpayer, and any notes of oral com-
munications with the taxpayer or the tax-
payers representative. If no face-to-face
or telephonic conference is held, review of
those documents will constitute the CDP
hearing for purposes of section 6330(b).
A-D7 of the proposed regulations fur-
ther clarifies that when a business taxpayer
is offered an opportunity for a face-to-face
conference it will be held at the Appeals
office closest to the taxpayers principalplace of business. The current regula-
tions have been misinterpreted by some
taxpayers as requiring the IRS to hold a
face-to-face conference at the taxpayers
principal place of business.
Q&A-D8 of the proposed regulations
is new. It describes specific circum-
stances in which Appeals will not hold
a face-to-face conference with the tax-
payer or the taxpayers representative
because a conference will serve no use-
ful purpose. The experience of Appeals
is that although most taxpayers requestface-to-face conferences, they are some-
times difficult to schedule on a date and at
a time that is convenient for the taxpayer.
In some of these cases, taxpayers or their
representatives have used the scheduling
of a face-to-face conference as a tactic
to delay the IRSs collection efforts. In
other cases, taxpayers have requested a
face-to-face conference merely to raise
frivolous arguments concerning the Fed-
eral tax system or to request collection
alternatives for which they do not qual-
ify. Q&A-D8 of the proposed regulations
provides that a face-to-face conference
need not be offered if the taxpayer or
the taxpayers representative raises only
frivolous arguments concerning the Fed-
eral tax system. See the IRS Internet
site, www.irs.gov/pub/irs-utl/friv_tax.pdf,
for examples of frivolous arguments. A
face-to-face conference also will not be
granted if the taxpayer proposes collection
alternatives that would not be available to
other taxpayers in similar circumstances.
A face-to-face conference need not be
granted if the taxpayer does not provide
in the written request for a CDP hearing,
as perfected, the required information set
forth in A-C1(ii)(E) of paragraph (c)(2) of
the proposed regulations.
In addition, a face-to-face conference
will not be held at the location closestto the taxpayers residence or principal
place of business if all Appeals officers or
employees at that location are considered
to have prior involvement as provided in
A-D4. In this case, the taxpayer will be of-
fered a hearing by telephone or correspon-
dence, or some combination thereof. The
taxpayer may be able to obtain a face-to-
face conference at the Appeals office clos-
est to the taxpayers residence or princi-
pal place of business under these circum-
stances if the taxpayer waives the require-
ment of section 6330(b)(3) concerning im-partiality of the Appeals officer or em-
ployee. Appeals will offer the taxpayer a
face-to-face conference at another Appeals
office if in the exercise of itsdiscretion Ap-
peals would have offered the taxpayer a
face-to-face conference at the original lo-
cation.
With the foregoing exceptions, it is
anticipated that a face-to-face conference
will ordinarily be offered with respect to
any relevant issues or collection alterna-
tives for which the taxpayer qualifies.
Sections 301.63301(e)(1) and301.63301(e)(3), A-E2 and A-E7 have
been changed to more closely follow the
language of section 6330(c)(2)(B). These
changes are necessary because these regu-
lations have been misinterpreted as defin-
ing the underlying tax liability that may
be considered at the CDP hearing under
section 6330(c)(2)(B) to be the tax liabil-
ity listed on the CDP Notice. The existing
regulations, which refer to tax liability on
the CDP Notice, were intended merely
to make clear that taxpayers may only
challenge taxes or tax periods listed on
the CDP Notice, not to supply a substan-
tive definition of underlying tax liability.
Section 301.63301(e)(3), A-E6 has been
amended to clarify that taxpayers who
receive CDP hearings can only qualify for
collection alternatives available generally
to taxpayers in similar circumstances.
The experience of the past six years has
revealed that many taxpayers raise an is-
sue with Appeals but fail to furnish any
documentation or evidence with respect
to the issue despite being given a reason-
able period to do so. For example, a tax-
payer may request an installment agree-
ment, but when an Appeals officer or em-
ployee requests financial data necessary
to determine eligibility for the installment
agreement, the taxpayer may not comply
with the request. Or a taxpayer may dis-pute liability for a tax period by claim-
ing entitlement to deductions, but provide
no substantiation for the deductions in re-
sponse to requests from Appeals. Current
301.63301(f)(2), A-F5 provides that a
taxpayer may not seek judicial review of
an issue that he has not raised during the
CDP hearing. A-F5 is revised to clarify
that in order to obtain judicial review, a
taxpayer must not only bring the issue to
the attention of Appeals but must also sub-
mit, if requested, evidence with respect to
that issue. Under revised A-F5, if the tax-payer does not provide Appeals any evi-
dence with respect to the issue after being
given a reasonable opportunity to submit
such evidence, then he may not ask a court
to consider the issue.
There has been some confusion about
what documents Appeals should retain,
and what notations the Appeals officer or
employee conducting the hearing should
make, in order to provide a judicially re-
viewable administrative record. A new
Q&A-F6 has been added to specify the
contents of the administrative record re-quired for court review.
The IRS receives a number of tardy
requests for CDP hearings. The changes
to 301.63301(i)(2) explain how these
requests will be treated. The proposed
amendments to the regulations add a new
Q&A-I1 to 301.63301(i)(2) to explain
that a taxpayer must request an equiva-
lent hearing in writing. A taxpayer may
obtain an equivalent hearing if the 30-day
October 24, 2005 782 200543 I.R.B.
-
8/14/2019 US Internal Revenue Service: irb05-43
15/88
period described in section 6330(a)(3) for
requesting a CDP hearing has expired.
Unlike an Appeals determination in a
CDP hearing, the Appeals decision in an
equivalent hearing is not reviewable in
court. Under new Q&A-I1, the IRS is not
required to treat a late-filed CDP request
as a request for an equivalent hearing.
Section 301.63301(c)(2), A-C7 has been
amended to require that the taxpayer be
notified of the right to an equivalent hear-
ing in all cases in which a tardy request for
a CDP hearing is received. It is expected
that the IRS will either send the taxpayer a
letter or orally inform the taxpayer that the
CDP hearing request is untimely and ask if
the taxpayer wishes to have an equivalent
hearing. If the taxpayer elects to have an
equivalent hearing, the IRS will treat the
CDP hearing request as a request for an
equivalent hearing without requiring the
taxpayer to make an additional writtenrequest.
Current Q&A-I1 through I5 are
renumbered Q&A-I2 through I6. The
proposed regulations add Q&A-I7 to
301.63301(i)(2) to clarify that the pe-
riod during which a taxpayer may obtain
an equivalent hearing is not indefinite.
The equivalent hearing procedure is not
provided by statute but, consistent with
the legislative history of RRA 1998, was
adopted in order to accommodate tax-
payers who failed timely to exercise their
right to a CDP hearing. The equivalenthearing was meant to occur near the time
a CDP hearing held pursuant to a timely
request would have occurred, because it
was meant to address the same matters
that would have been addressed at a CDP
hearing. The procedure was not meant
to provide a hearing right that could be
exercised months or years after the cir-
cumstances that precipitated the proposed
levy have passed. A hearing before Ap-
peals at a later time may be obtained under
the Collection Appeals Program. There-
fore, proposed Q&A-I7 limits to one yearthe period during which a taxpayer may
request an equivalent hearing. The period
commences the day after the date of the
CDP Notice issued under section 6330.
Because the time for requesting an
equivalent hearing will be limited, the
proposed regulations add new Q&A-I8,
Q&A-I9, Q&A-I10 and Q&A-I11 to
301.63301(i)(2) to provide the same
rules governing mailing, deli